A Marx for Post Keynesians

1
A Marx for Post Keynesians

• Steve Keen

Department of Economics University of
NSW Australia
2
Introduction

• The Post Keynesian Glass House
• Methodological criticism without methodological
  foundations
• Marxs two sets of axioms
• A methodological foundation for Post Keynesianism

3
Post Keynesian MethodologyUnity in Opposition?

• Opposition to neoclassical method sole agreed
  common ground
• Harcourt and Hamouda diversity is strength
• Horses for courses and Instrumentalism
• Backhouse why is neoclassical methodology always
  inappropriate?

4
Philosophy

• Keynes From atomism to internal relations
• Whitehead a hierarchy of internal relations
• Lawson/Bhaskar
• Deductive logic, Axioms and Positivism
• Organic vs Atomic Axioms
• Realism does not rule out axiomatic reasoning

5
Dialectics and Organicism

• Social Unities
• Foreground and background aspects
• The philosophy of endogenous change
• Marxs advantage over Whiteheads hierarchy of
  internal relations
• Identifying the central unity of the commodity
• Structured axiomatic foundation for
  classical/Post Keynesian analysis

6
Post Keynesianism vs Marxs Two Sets of Axioms
7
Marxs Labor Axioms

• Value is socially necessary labor-time
• Commodities exchange in proportion to value
• Labor-power is a commodity under capitalism
• Labor transfers value directly to product,
  commodities indirectly
• Difference between labor and labor-power unique

8
The Labor Theory of Value

• Value of labor-power subsistence wage bundle
  of commodities
• Labor-time gt value of labor-power
• Difference is source of surplus-value
• Additional axioms
• Prices proportional to variable and constant
  capital
• Reconciliation of values and prices via
  transformation problem
• Uni-directional analysis of capitalism,
  historically invalidated predictions

9
Marxs Commodity Axioms

• Commodity the essential unity of capitalism
• Use-value and exchange-value key aspects
• Use-value objective
• Exchange-valueexchange-value of inputs
• Incommensurable under capitalism
• Labor-power a commodity
• Two main circuits
• C-M-C (consumption)
• M-C-M (production)

10
Source of Surplus

• Labor Axioms
• Difference between value of labor power and value
  labor transfers to product
• Unique attributes of labor/labor-power
• Commodity Axioms
• Quantitative difference between use-value and
  exchange-value in circuit of capital
• Common to all commodities
• Contradicts Labor Axioms

11
Basis for incommensurability of use-value and
exchange-value

• Pre-capitalist society
• Exchange of use-values socially determined
• Commodity exchange on the border of societies
• Perception of utility can influence exchange
  ratio
• Production specifically for exchange
• Distinction between use-value and use-value for
  exchange
• Production the basis of exchange-value
• Capitalist exchange
• Exchange-value and use-value incommensurable

12
Effective Demand

• From M-C-M to C-M-C Use-value predominates
• Three barriers
• The entirely superficial
• Market level
• The economy expanded reproduction, aggregate
  demand, and credit
• Critique of Says Law
• Capitalists supply dynamically exceeds demand
  accumulation invalidates Say
• Capitalism without capitalists

13
Wages and Value

• Labor Axioms
• Average WageValue (Harvey, Green)
• Extra-economic determination
• Commodity Axioms
• Labor-power a commodity AND non-commodity
• The dialectic of labor Value is wage minimum
• "The natural price of labour is nothing but the
  minimum wage." (1846, p. 55.)
• "Ricardo, e.g., who believes that the bourgeois
  economy deals only with exchange value, and is
  concerned with use-value only esoterically,
  derives the most important determinations of
  exchange value precisely from use-value, from the
  relation between the two of them for instance,
  ... wage minimum". (1857, pp. 646.)
• "For the time being, necessary labour supposed as
  such i.e. that the worker always obtains only
  the minimum of wages...."(1857, p. 817.)
• "the value of the labour power is equal to the
  minimum of wages",(Marx 1857, Part I, p. 46.)
• 2 components cost of reproduction plus share in
  surplus (Sraffa)

14
Endogenous Money and Asset Prices

• Money as a commodity/non-commodity
• Exchanged, and essential for exchange,
• But not produced by means of commodities
• Dialectic of money
• Exchange-value set by use-value
• "What, now, does the industrial capitalist pay,
  and what is, therefore, the price of the loaned
  capital?... What the buyer of an ordinary
  commodity, buys is its use-value what he pays
  for is its value. What the borrower of money buys
  is likewise its use-value as capital but what
  does he pay for? Surely not its price, or value,
  as in the case of ordinary commodities." (Marx
  1894, p. 352.)
• Money endogenous
• Two price levels (Minsky, Davidson)

15
Commodities and Non-Commodities

• Commodities
• Produced by commodities
• Involved in the production of other commodities
• Exceptions
• Artworks, rare wines (Ricardo)
• New products
• Other doctrines
• Sraffian
• All products are commodities
• Austrian
• All products are non-commodities

16
Conclusion

• Post Keynesianism not eclectic but dialectic
• Benefits from adopting Marxs Commodity Axioms
• Methodological consistency
• Unify disparate analyses
• Alternative paradigm to neoclassical
• Objectivist vs Subjectivist
• Organic vs Atomistic
• Dynamic vs Static
• Pedagogy

17
The Revelation

• "Is not value to be conceived as the unity of
  use-value and exchange value? In and for itself,
  is value as such the general form, in opposition
  to use-value and exchange value as particular
  forms of it? Does this have significance in
  economics? ... Does not use-value as such enter
  ... as a determinant of the form itself, e.g. in
  the relation of capital and labour? ... If only
  exchange value as such plays a role in economics,
  then how could elements later enter which relate
  purely to use-value ... This is not in the
  slightest contradicted by the fact that exchange
  value is the predominant aspect. But of course
  use does not come to a halt because it is
  determined only by exchange ... this is to be
  examined with exactitude in the examination of
  value, and not, as Ricardo does, to be entirely
  abstracted from, nor like the dull Say, who puffs
  himself up with the mere presupposition of the
  word utility'. Above all it will and must become
  clear ... to what extent use-value exists not
  only as presupposed matter, outside economics and
  its forms, but to what extent it enters into it.
  ... The two aspects in no way enter into relation
  with each other, ... Money itself is a commodity,
  has a use-value for its substance."(1857, pp.
  267-68.)

18
The Application

• "The change of value that occurs in the case of
  money intended to be converted into capital ...
  must ... take place in the commodity bought by
  the first act, M-C, but not in its value, for
  equivalents are exchanged, and the commodity is
  paid for at its full value. We are, therefore,
  forced to the conclusion that the change
  originates in the use-value, as such, of the
  commodity, i.e. its consumption." (p. 164)
• "the daily cost of maintaining it, and its daily
  expenditure in work, are two totally different
  things. The former determines the exchange value
  of the labour power, the latter is its
  use-value... Therefore, the value of labour
  power, and the value which that labour power
  creates in the labour process, are two entirely
  different magnitudes ... What really influenced
  him was the specific use-value which this
  commodity possesses of being a source not only of
  value, but of more value than it has itself. ...
  in this transaction he acts in accordance with
  the 'eternal laws' of the exchange of
  commodities. The seller of labour power, like the
  seller of any other commodity, realises its
  exchange value, and parts with its use-value."
  (p. 188.)

19
Wages and value

• "Ricardo, e.g., who believes that the bourgeois
  economy deals only with exchange value, and is
  concerned with use-value only exoterically,
  derives the most important determinations of
  exchange value precisely from use-value, from the
  relation between the two of them for instance,
  ... wage minimum". (1857, pp. 646.)
• "the value of the labour power is equal to the
  minimum of wages", (1864, I, p. 46.)
• "the minimum wage, alias the value of labour
  power".(1864, II, p. 223.)

20
Expectations, use-value, and asset prices

• "Ricardo never uses the word value for utility or
  usefulness or "value in use". Does he therefore
  mean to say that the "compensation" is paid to
  the owner of the quarries and coalmines for the
  "value" the coal and stone have before they are
  removed from the quarry and the mine--in their
  original state? Then he invalidates his entire
  doctrine of value. Or does value mean here, as it
  must do, the possible use-value and hence the
  prospective exchange-value of coal or stone?"
  (1864, II, p. 400. Emphases in original)